Yo Pit Crazies,
I guess no news is good news as the market starts to shift to a new gear.
What news we did get on Thursday was pretty good, though:
- Lowest jobless claims in 50 years
- Nvidia Corp. (Ticker: NVDA) might use Intel Corp. (Ticker: INTC)
- The Ukraine situation is still bad, but that is not new
Heck, I plum forgot about the reopen trade being a thing with all the bad news of the past couple of months.
But it seems there is some dawn and it might not be all dark … even as the market was pricing in a lot of darkness lately.
The question is if the market for volatility is pricing it right. (If you read yesterday’s letter you’ll have a clue.)
Let us sleuth!
Volatility Cuts Both Ways
Like I said above, a lot of bad news such as inflation, war and general COVID hangover malaise has dwarfed the prospect of the world getting back to business.
The Fed is also finally turning off the printing press. (Though stocks have not seen a downtick since that pronouncement – note to self, Fed.)
The Little Engine That Could is still the Powershares QQQ Trust (Ticker: QQQ) …
I saw a 2.2% move today as I closed some of my QQQ calendars into the bell. (Some of the Pro Members did better; see The Rundown).
A 2.2% move is over a 32% move. QQQ IV is in the mid-20s.
The S&P 500 is even cheaper next month with IVs in the teens. Overall I think implied volatility is underpriced.
I think it is a perfect time to own short-term options in the big indexes and buy puts on the VIX.
I added a trade like that to the Volatility Trading Club on Thursday.
IV informs Mark’s ideas in Nitro Trader so if you want easier trades using vol, check him out.
The Rundown
Capitol Gains w/ Frank Gregory
My Exxon Mobil Corp (Ticker: XOM) call calendars are running up 40% from inception.
Power Income Trader:
Griff took profits in Gold Trust ETF (Ticker: GLD) for 43% today.
Big Money Flow
Mark closed some SouthWestern Energy Corp. (Ticker: SWN) calls for a 21.1% gain this week.
Pro Trading Room:
The Pro Room is Option Pit’s live access to Mark and myself during trading hours. Our Pro students post trade ideas with Mark and me during the entire trading session.
The Pro Room was liking my QQQ calendars from Trading Legion into the close:
Nitro Trader:
Option Pit CEO Mark Sebastian uses butterfly and spread strategy for trades that can profit in either direction.
Mark jumped into some cheap Apple Inc. (Ticker: AAPL) put calendars and SPDR Select Energy ETF (Ticker: XLE) call calendars for a pair.
Trading Legion:
The Trading Legion is a “next step” trading education program. The goal is to teach students the best times to buy options.
My QQQ calendars ended up 18% on the day and I am riding half into expiration.
Volatility Edge & Volatility Trading Club:
The Option Pit VIX Light Is Yellow turning to Red as the market is gearing up for the next move.
Remember, a lot of vol strategies I use are market neutral. That means whether SPX or VIX go up or down, the positions still make money. This is a technique you can learn in the Volatility Trading Club and Volatility Edge!
To Your Trading Success,
AG